In respect of the increase in household incomes, the funds collected by banks in the form of deposits, savings accounts, and Bank Indonesia Certificates have been growing, the Government of the Republic of Indonesia imposes final Article 4(2) Income Tax on savings interest.
Tax Subject
Article 4(2) Income Tax is imposed on individuals, entities, institutions, or organizations that receive income in the form of savings interest.
The following are not the above Article 4(2) Income Tax subject:
Indonesian tax residents whose entire income in 1 (one) Fiscal Year, including interest and discounts, does not exceed the Non-Taxable Income;
Indonesian Bank or Indonesian branch of a foreign bank; and
Pension Fund whose establishment has been validated by the Minister of Finance as long as the funds are obtained from sources of income as referred to in Article 29 Law Number 11 Year 1992 regarding Pension Funds based on Tax Exemption Letter issued by Directorate General of Taxes Information System or Tax Office where the Pension Fund is registered as a Taxpayer.
Tax Withholder
The tax withholder is the bank that pays interest on deposits.
Tax Object
Article 4(2) Income Tax is imposed on income in the form of deposit interest. The following savings interests are exempted from the imposition of Article 4(2) Income Tax:
Savings interest whose the principal amount of the deposit does not exceed IDR7,500,000 and is not a split amount; and
Savings interest at a bank appointed by the Government related to ownership of simple houses, lands for simple houses, or simple flats in accordance with applicable regulations, to be occupied alone.
"Savings" refer to savings at a bank under any name, including giro, which are withdrawn according to certain conditions stipulated by each bank.
Included in the definition of interest is interest received or derived from savings placed overseas through a bank established or domiciled in Indonesia or an Indonesian branch of a foreign bank.
Tax Base
The basis for imposition of Article 4(2) Income Tax on savings interest is the gross amount of interest received or earned from the savings.
Tax Rate
Deposit interest is subject to Article 4(2) Income Tax with the following rates:
20% of the gross amount for local taxpayers and permanent establishment; and
20% of the gross amount or applicable tax treaty rate for foreign taxpayers.
Due Date
Article 4(2) Income Tax on savings interest is payable at the time the interest is received or earned.
Withholding Tax Procedure
Article 4(2) Income Tax is withheld by the Bank on income in the form of interest received or earned from savings.
During the time this article was written, there were no applicable rules regarding withholding tax slips of Article 4(2) Income Tax on interest from savings.
Tax Payment Procedure
The Withholder of Article 4(2) Income Tax is required to pay the tax to the Post Office or a bank appointed by the Minister of Finance, no later than the 10th (tenth) of the following month after the month the tax withholding is made.
If the tax payment due date coincides with a holiday including Saturday, Sunday, a national holiday, days off for holding the General Election, or national collective leave, the payment can be made on the next working day.
The income Tax payment is made using a Tax Payment Slip with the tax account code 411128 and the payment code 404.
Tax Filing Procedure
The withholder of Article 4(2) Income Tax must report the income tax withheld in the monthly Article 4(2) Final Income Tax return by no later than 20th (twenty) days after the tax period ends.
If the filing due date of the monthly Article 4(2) Final Income Tax return coincides with a holiday including Saturday, Sunday, a national holiday, days off for holding the General Election, or national collective leave, the filing can be made on the next working day.
Individuals who receive interest on savings are required to report the interest income and Article 4(2) Income Tax withheld in the Annual Individual Income Tax Return by no later than 3 months after the end of the tax year.
Meanwhile, entities that receive interest on savings are required to report interest income and Article 4(2) Income Tax withheld in Attachment IV of the Annual Corporate Income Tax Return by no later than 4 months after the end of the tax year.
Example of Article 4(2) Income Tax on Interest on Deposits Calculation
Siska has a savings account in Bank Full Money Indonesia with December 2021 average balance amounting to IDR150,000,000. Interest paid by Bank Full Money Indonesia is 10% per annum. In December 2021, Siska received savings interest of IDR1,250,000. How much tax must be withheld on Siska’s savings interest? And how much interest after tax was received by Siska in December 2021?
Income Tax Article 4(2) withheld = Rate x Gross Amount
Income Tax Article 4(2) withheld = 20% x IDR1,250,000
Income Tax Article 4(2) withheld = IDR250,000
So, the savings interest after tax received by Siska in December 2021 = IDR1,250,000 - IDR250,000 is IDR1,000,000
Legal Basis:
Law Number 7 Year 1983 regarding Income Tax as lastly amended by Law Number 7 Year 2021 regarding Harmonization of Tax Regulations
Government Regulation Number 131 Year 2000 regarding Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate as lastly amended by Government Regulation Number 123 Year 2015 regarding Amendment of Government Regulation Number 131 Year 2000 regarding Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate
Minister of Finance Regulation Number 212/PMK.03/2018 regarding Withholding Income Tax on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate
Director General of Taxes Regulation Number PER-03/PJ/2020 regarding Procedure for Issuing of Withholding Income Tax Exemption Letter on Interest from Savings and Time Deposits and Discount on Bank Indonesia Certificate Received or Obtained by Pension Fund whose Establishment Has Been Authorized by the Minister of Finance or Has Obtained a Permit from the Financial Services Authority
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